What changed
RRBs can now freely determine interest rates on NRE savings and term deposits (1 year+) and NRO savings deposits, removing earlier caps. However, these rates must not be higher than rates on comparable domestic rupee deposits. Prior board or ALCO approval is required, and uniform rates must apply across all branches.
What it means for you
This gives RRBs greater flexibility to compete for non-resident deposits by adjusting rates based on market conditions. Banks must ensure they do not offer NRE/NRO rates above domestic rates to avoid arbitrage. Closer monitoring of external liabilities and asset-liability compatibility is essential to manage systemic risk.
What you must do
- Obtain board or ALCO approval before setting new NRE/NRO deposit rates.
- Ensure NRE/NRO rates do not exceed comparable domestic rupee deposit rates.
- Apply uniform rates across all branches for these deposits.
- Monitor external liabilities and maintain asset-liability compatibility.
- Apply revised rates only to fresh deposits and renewals of maturing deposits.
Who it affects
All Regional Rural Banks (RRBs), NRE and NRO depositors, RRB asset-liability management teams
Can RRBs offer higher NRE rates than domestic rates?
No, NRE and NRO deposit rates cannot exceed rates on comparable domestic rupee deposits offered by the same RRB.
Do these new rates apply to existing deposits?
No, the revised rates apply only to fresh deposits and upon renewal of maturing deposits.
What approvals are needed before setting these rates?
RRBs must obtain prior approval from their Board or Asset Liability Management Committee (if powers are delegated) before fixing interest rates on NRE/NRO deposits.